What's behind B.C.'s unquenchable thirst for craft beer?

Co-owner Mike Coghill at Yellow Dog Brewing, which opened in July and won best in show at the B.C. Beer Awards in October.

The rise of craft beer in British Columbia has been astonishing – and there’s still no end in sight.

At the end of a year in which 17 new breweries opened – with at least another five imminent – B.C. now boasts 83 separate beer-producing concerns, according to Brewed Awakening’s latest reckoning. That’s almost double the tally from five years ago. And that number will likely top 100 in 2015, with at least an additional 20 breweries past the planning stages.

All of these breweries are relatively small operations located in industrial zones of the province’s cities, mostly in the Lower Mainland. Almost exclusively, these breweries find they have to order more tanks shortly after opening, just to keep up with demand. They literally cannot make beer fast enough.

Why this unquenchable thirst?

Many in the industry make it clear that craft beer is not a fad – it’s here to stay. While some microbreweries may in future fall by the wayside due to poor sales, poor location, failed business plans, or inconsistent product, dozens of others are set to remain entrenched in B.C.

Craft beer’s popularity is partly explained by residents’ desire to support local businesses, says Ken Beattie, president of the B.C. Craft Brewers Guild, which currently counts 41 of the province’s breweries as members.

“We’re very conscious of where things are created, how they’re created and ideally by who they’re created. And the brewing industry fits perfectly into that box,” Beattie says, adding that the craft beer scene also satisfies more modern needs.

“It’s constantly changing, so it satisfies this constant information thing. There’s always something new. I can find out about anything two thumbs away. I can try any beer I want to try by going to a liquor store or a local brewery. I can find out about styles, I can have a conversation with the person who makes the beer or an expert. I can grow my knowledge through trying it.

“The accessibility is at an all-time high. The amount of creativity is at an all time high.”

BEER SLIDE HIDES CRAFT GAINS

That said, beer in general is on the decline, and has been for a while as drinkers turned to wine and cocktails. But buried in that generalization and the still-mighty market share held by the big breweries – 79 per cent in B.C., according to recent figures – are surging sales figures for craft beer.

The smallest breweries in the B.C. government’s classification, which produce up to 15,000 hectolitres a year, are still seeing huge growth, posting an increase in sales of almost 50 per cent in the year up to September 2014, according to the most recent Quarterly Review by the B.C. Liquor Distribution Branch. The two bigger categories of brewery saw sales dollars decreasing between three and 4.25 per cent over the same period.

Beattie believes craft breweries can eat much further into beer’s market share.

“Seventy-nine per cent of those people aren’t drinking our beers. From a sales point of view that’s a big chunk of sales to go after,” he says. “For me, could we get to 40/60? Yeah. Could we get to 50/50? It’s happened in Portland (Ore.). … I don’t think that’s inconceivable.

“There’s price compression that’s going on in the market,” he explains. “Where there used to be a big leap from mainstream beer to craft beer, there isn’t any more. The jump from a six-pack of Canadian to a six-pack of Phillips isn’t much more.”

LIQUOR LAWS LOOSENED

Another boost to the craft beer boom has come from the provincial government and the liquor board under its control, long seen as an impediment to the growth of the industry due to many liquor laws dating back to the Prohibition era.

Earlier this year the government undertook an unprecedented review of liquor policy in consultation with numerous companies and organizations, as well as the public, in a bid to update many of the province’s liquor laws.

For Beattie, the biggest game-changer came last year, when breweries were allowed to apply for tasting lounge licences, enabling them to operate like simple bars.

“The government allowing tasting lounges was massive. … Just the access in allowing the public to sample the beers in a non-restrained and subversive manner, treating you like adults, and letting you exercise your choice in where, when and how much,” he says.

It’s also opened up a critical revenue stream for many of these small businesses, while focusing on draught beer has allowed them time to get up and running and start selling their product without worrying about the additional headaches of bottling or canning and distribution.

While Beattie welcomes the more open, consultative attitude shown by the provincial government, he says that bureaucracy remains a huge obstacle for craft breweries.

“The challenge is still the process, the bureaucracy,” he says. “There’s no blame, it’s just the system hasn’t caught up to the demand. … As much as they want to streamline the process, it hasn’t caught up.”

POSSIBLE PITFALLS

As the craft beer industry grows seemingly boundlessly, an uneasy question hovers in the background: How long can it last? The market must plateau at some point.

Beattie points out some factors that could see smaller breweries fall by the wayside. For example, the number of trained and experienced brewery staff in B.C. isn’t keeping pace with the rapid growth in the number of breweries, which could lead to problems with consistency of product.

He also says that many brewery owners may just not be ready for the multiple challenges facing a rapidly expanding business.

“A lot of people (in craft beer) don’t come from the industry and the industry is very complex, way more complex than people think. And as you get more people you have to get way better at other things than just making beer,” he says.

“You’ve got to know how to promote, how to interact, how to distribute, you’ve got to manage a sales team all of a sudden, you’ve got safety committees you’ve got to look after, all of these things that happen as you grow.”

STARTUP SUCCESS

Mike and Melinda Coghill don’t have that problem – yet.

With the going rate for opening a microbrewery starting at a cool half-a-million dollars, the couple thought it best to keep their full-time careers – Melinda in corporate finance, Mike as a project manager for Best Buy – while they got Yellow Dog Brewing Co. in Port Moody off the ground.

“We knew that the business needed to be able to grow as fast as possible, so not burdening the business with having to take care of us allowed it to grow faster,” Mike Coghill says. “It’s what allowed us to get new tanks. It gave us more flexibility to begin with.”

For the Coghills, running a brewery had its origins in the couple’s long-running love of beer, a critical prerequisite – alongside hard work and impeccable planning – for undertaking such a project, says Mike.

“You’re going to be dealing with beer every day,” he says. “If you just think it’s a good business, it won’t work. You have to go to events, you’ve got to talk about beer, people have to see that passion from you and if they don’t feel that from you then you won’t be successful.”

But it’s not world domination that Yellow Dog is plotting. The Coghills are more concerned with maintaining their place in the community, pursuing steady growth – and, of course, continuing to make great beer.

“It’s to make good beer that we enjoy that goes through our criticisms first, and if we’re happy then we feel that the public will be happy with it,” Coghill says. “Of course you need things like marketing. But the root of everything starts with good beer.”

The bottling and canning line at Central City’s new Surrey facility.

LONG-TERM GOALS

Meanwhile, other, longer-running B.C. breweries are showing where expansion and diversification can lead.

Central City Brewing opened as part of the Surrey mall of the same name in 2003. It was a slow-burner until cans of its Red Racer brand of beers began finding traction and brewmaster Gary Lohin began racking up the awards – including Canadian Brewing Awards for brewery of the year in 2010 and 2012.

At the end of last year, Central City moved into a giant, brand new 65,000-square-foot facility a few kilometers north, financed by the Surrey City Development Corporation – in itself a huge sign of confidence in the future of craft beer in general, and Central City’s plans in particular.

“This facility that we have, the money that we spent on it – it’s about $30 million for the building and the equipment – we designed it not to service just British Columbia but to service North America,” Lohin says. “We think our packaged product can stand up to anybody’s in North America.”

Central City already exports beer across Canada, and to Washington and select locations in other states including Oregon, California, Colorado and Massachusetts.

As well as the grand export plans, Central City used the step up in size to diversify its product range. Spirits including vodka and gin are already available and a whisky is on the way, while coolers are produced to Central City’s recipe in facilities in Calgary and Toronto.

“It’s diversification, so all your eggs aren’t in one basket, and I guess you can smooth out the highs and lows a little bit.

“I think our whisky is going to knock it out of the park when it’s ready in three years,” Lohin adds. “I think it can only accentuate the Red Racer brand because we’re totally focused on quality liquids.”

For those who are thinking about taking the path to producing quality liquids of their own, Beattie offers three key pieces of advice:

“Build to where you want to be, not where you can afford to go,” he says firstly, citing the many microbreweries that realized they needed more capacity soon after opening.

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